I’ve considered buying rentals with IRA money, but for me the drawbacks outweigh the advantages. Good luck with it though!
Good luck!
aaargh,
the property we we interested in has too much settlement, so DH said “pass”. Some other buyer will snap it up in order to be able to move $ out of China.
On with the hunt!
Dang. Fingers crossed that a new opportunity will pop up soon.
We have a house that we rent out. Originally when we bought it, we thought about retiring there but that is no longer the case. I want to unload it since it is enough of a worry having to deal with one house never mind a second one. As we get older, it becomes more and more difficult. It isn’t worth the hassle. Getting rid of it is another problem since it is my understanding that all the tax “losses” that have been deducted get added back in upon its sale.
Yeah… You have to subtract the depreciation from your basis which is going to increase your capital gains and your capital gains tax.
Exactly. Having to replace washers, dryers, refrigerators etc. and worrying about probably needing another roof in a few years makes it totally unworth it as an investment. Price appreciation in this area is pretty nonexistant. They are still below the peak of 2006. My house has appreciated ~ 50% - in 30 years. I’ll take the financial markets anyday to real estate as an investment.
I should also add the nuisances associated with local regulations and insurance. My rental is located in an area that is extremely easy to rent out - a beach area with a large university 5 miles away. I’ve never had a problem renting it. Now the town is trying to get rid of landlords because they dislike renters so they are imposing all kinds of laws. For example, if my tenants make too much noise and the police are called, I’m liable to the point of 1 year in jail. I just received a letter from the town stating that if I rent out for periods of 30 days or less (this is common as there are also weekly vacation rentals), I have to register the house and collect sales and hotel tax.
“I just received a letter from the town stating that if I rent out for periods of 30 days or less (this is common as there are also weekly vacation rentals), I have to register the house and collect sales and hotel tax.”
You have the popularity of airbnb to thank for this.
The depreciation lowers ordinary taxes and increases capital gains taxes so that’s usually advantage to the taxpayer.
@DocT, the house is near a beach and your property value only increased 50 percent in 30 years? That is terrible.
The rental income increases returns though.
I’m sorry - two different houses. My primary residence has increased 50% in the last 30 years. I’ve only had the rental for 13 years but it hasn’t increased much either. Both houses are way down from 2006. My primary residence is in CT, an economic disaster over the last 30 years. My rental is in RI, another basket case. Rents are not up much over that time and my expenses have been increasing.
I have a signed sales agreement for one of my rentals. It came out of the blue and is a cash offer, contingent on the buyer closing on the sale of their house, which is scheduled for March 4. I started having second thoughts a few posts back when posters were discussing cash flow for retirement.
I get 8-10% ROI, depending on repairs that year. Not going to come close with bank or market…Cute little house, gets rental interest, but is on a street that’s getting worse, in a town of 300 that’s getting worse. 90-95% of renters in my area are renting because they have bad credit or no down payment, which is minimal due to purchase price. Appreciation almost none existent in my area.
I keep trying to remember rentals are great with a good renter and he** when it’s not. Clean-up between renters and finding good renters is a pain. Our other continual big fear is I’m in the #1 meth state; landlord gets stuck with the cleanup, ~$20-25000, I still have 3 other units. Something is always breaking or needed repair between rentals and my house.
Rentals look tough. If I had the ability and liked fixing things up, maybe I would have purchased rentals…but I don’t.
A lot of people around here have done extremely well owning rentals. The appreciation is better in most of the areas of the Bay Area than other parts of the country. I don’t know of any meth areas around here. I don’t know too many people who are abusing drugs or alcohol. Maybe I need to get out more. 
^^Come buy rentals here…you’ll find out quickly about meth…bad bad stuff. A house is virtually unable to sell after contamination, even if it’s been cleaned and certified safe by the state. People are arrested cooking it in the back seat with children in the car. Blow up their houses–the process is highly flammable. There is a whole 'nother world out there.
@srystress, thanks for the invitation but I am going to pass. 
^ It’s actually worse than that, it’s called depreciation recapture, and the portion of the gain attributable to recapture is taxed at a rate is 25%, which is way higher than the capital gains rate.
Only the depreciation gets taxed. If you’ve generated tax losses for any other reasons, those do not get taxed when you sell.
You could do a 1031 exchange into another rental in a better area.
Rentals can be a pain, but once my mortgages are paid off I will be getting an ROI in excess of 30%/year (maybe far in excess as a bunch of my properties were 100% financed, which gives a theoretical infinite ROI, but I didn’t accurately track where every penny came from), and a ROE of around 10%/year.
If rents go up, the return %ages go up, and if values go up, net equity goes up as well. Win-win.
In addition, having the tenants pay my mortgages has created a lot of equity value for us for free.
A pretty fair percentage of the wealthiest people in the world created their fortunes through real estate, it’s #3 of the top ten ways self-made billionaires on the Forbes 400 made their money.
Instead of residential rentals, buy REITS . You get appreciation of the stock and a dividend (taxed at ordinary income)minus the headaches.
My rentals are 1.5 miles from my house. I definitely wouldn’t want rentals much greater distance. I’m in a rural, industrial rust-belt state…have to go pretty far to get a better area for a 1031 exchange!
I’ve had them 14 years…they’ve been good cash flow, but a heavy physical, emotional, and sometimes marital cost at times. I think it could be a different story in an area with appreciation and/or a higher quality of renters.
In the same time the farm ground I bought has appreciated 400%. Win some, lose some
"minus the headaches. "
Like when the value of the REIT goes down??